On 30 Aug 2016, Royal Decree (No 621) was gazetted putting into effect the Govt's resolution for the introduction of Social Enterprise tax structures in Thailand.
Social Enterprise
A "Social Enterprise" is a company or juristic partnership that is established under the laws of Thailand with the objectives of:
Promoting employment, solving problems or developing the community, society or environment;
Without the intention of generating profits for shareholders or partners; and
Reinvesting not less than 70% of its net profits in the business or applying that amount for the benefit of farmers, poor, disabled or disadvantaged people or for other public benefit purposes as prescribed in a ministerial regulation.
The Tax Concessions
The tax concessions provided under Royal Decree (No 621) are as follows:
For the Social Enterprise
Exemption from corporate income tax on the net profit of the Social Enterprise that is reinvested in the business or applied for the benefit of farmers, poor, disabled or disadvantaged people or other public benefit purposes without any dividends or capital payments being made to shareholders or partners (1)
For Corporate Investors
Exemption from corporate income tax for 100% of the share capital amount a corporate shareholder or partner invests in the Social Enterprise that is compliant with all of the rules, procedures and conditions (2)
For Corporate Donors
Exemption from corporate income tax for 100% of the amount of money or assets a corporate donor donates to the Social Enterprise that is compliant with all of the rules, procedures and conditions, but when combined with other donations under Section 65 ter (3) of the Revenue Code, shall not exceed 2% of the net profit of the corporate donor (3)
(1) Provided however, this corporate income tax exemption is not available if the Social Enterprise does not meet the Revenue Department's rules, procedures and conditions for the reinvested or applied net profit.
(2) Provided however, this corporate income tax exemption is not available if 1) the Social Enterprise, in any financial year, pays a dividend or makes a capital payment to shareholders or partners of more than 30% of net profit or 2) if shareholders or partners transfer shares in the Social Enterprise before the SE is dissolved.
(3) Provided however, this corporate income tax exemption is not available if the Social Enterprise, in any financial year, pays a dividend or makes a capital payment to shareholders or partners of more than 30% of net profit.
Rules, Procedures and Conditions
Royal Decree (No 621) prescribes that a Social Enterprise shall:
Include the words "Social Enterprise" in its name;
Be certified as a Social Enterprise by the relevant authority as prescribed by the Director-General of Revenue;
File an application for approval by the Director-General of Revenue;
Not pay dividends or capital payments to its shareholders or partners;
Not transfer assets used in the business, except for transfers of assets that are permitted by the Director-General of Revenue;
Not enter into any agreement with shareholders or partners for payment of any remuneration to shareholders or partners, including persons who are related to the shareholders or partners;
Not change the operation that was approved as a Social Enterprise to any other type of business operation; and
Comply with the Revenue Department's additional rules, procedures and conditions.
Our Tax Insights and Updates are general information publications focusing on the laws for meeting tax compliance obligations, and tax rights and entitlements under the laws.